States move fast to protect their pot industries

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An installer puts in a drip irrigation line at Harborside Farms, a large marijuana grower in Salinas, California. Several states are establishing legal recreational marijuana markets despite tough talk from the Trump administration. (Jim Wilson/The New York Times file) - Bulletin

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An installer puts in a drip irrigation line at Harborside Farms, a large marijuana grower in Salinas, California. Several states are establishing legal recreational marijuana markets despite tough talk from the Trump administration. (Jim Wilson/The New York Times file)6252505

WASHINGTON — If a whiff of uneasiness hung over the trade show that drew thousands of marijuana entrepreneurs here this month, it wasn’t because they were just around the corner from a White House that has threatened to shut them down.

They had bigger worries, like sorting out the legitimate business ventures from the hype among row upon row of exhibitors showcasing cannabis growing, smoking, eating and even banking products. The Trump administration’s menacing signals seemed a mere sideshow to those who make their living off reefer, or aspire to.

After an initial period of postelection anxiety, pot businesses are increasingly confident that states where they are setting up shop have their backs, despite Justice Department warnings meant to rattle marijuana enthusiasts.

State leaders are proving themselves nimble at responding to the threat, moving to inoculate local marijuana industries that are fast becoming too important to state economies to leave vulnerable to the whims of Washington.

And they are moving not just in the places where it is politically easy, such as California. Even some Republican states are signaling Trump to back off.

“We are seeing states have become very territorial about their rights to do this, regardless of what the Trump administration does,” said John Hudak, a marijuana policy expert at the Brookings Institution. He points to Nevada, where Republican Gov. Brian Sandoval opposed the state’s successful legalization initiative but is nonetheless vowing to move forward with recreational pot there.

“This is someone who easily could have said, ‘No, let’s wait and see what Trump does,’” Hudak said. “But he is not doing that.”

Some of the more than 200 marijuana entrepreneurs who walked the halls of the U.S. Capitol this month during the industry’s annual lobby day — an event that has grown exponentially in size — were surprised by how many Republican congressional offices were eager to engage.

“People here are treating this more seriously,” said Morgan Paxhia, a San Francisco marijuana investor who was among those lobbying.

Trump administration plans

Trump’s intentions on pot are unclear. The White House has warned that recreational pot businesses could be subject to federal enforcement actions. Trump tacked a signing message onto the budget he recently signed that indicates he may not honor its prohibition on busting medical pot businesses operating legally under state laws. Attorney General Jeff Sessions is an old-school drug warrior eager to restore some of the zero-tolerance tactics that haven’t been part of the federal playbook for years.

But states say they can’t afford to wait to see how federal policy plays out.

“You have to have blinders on to not understand how large this industry can become,” said California Treasurer John Chiang. He has been taking a lead in the state’s efforts to move the industry into legitimacy, holding lengthy hearings aimed at helping banks step around the federal rules that make them reluctant to work with pot firms.

The easier it is for companies to get out of the shadows and operate like other normal businesses, Chiang says, the quicker they can start paying taxes to the state — and the harder it will be for the Justice Department to undermine the industry.

What states are doing

In several states, lawmakers are scrambling to find creative ways to keep federal agents out. California lawmakers are debating giving pot businesses the same kinds of protections as it has extended to immigrants in the country illegally, prohibiting local law enforcement from helping federal agents target them.

Colorado is mulling over a law that would let pot sellers instantly reclassify all of their recreational pot as medical in the event of a federal crackdown. (The White House condones medical pot.)

And Oregon lawmakers passed a bill aimed at protecting the privacy of pot users from federal intrusions by requiring cannabis shops to destroy records of what consumers purchase.

Not that some states aren’t tapping the brakes. Amid the federal uncertainty — and to the deep disappointment of marijuana advocates — Massachusetts lawmakers voted in December for a six-month delay in opening the state’s first recreational marijuana shops, pushing it back to mid-2018.

Colorado lawmakers eager to allow clubs where pot connoisseurs could consume the product opted to hold off, worried their efforts could antagonize the Justice Department. Gov. John Hickenlooper warned legislators off plans to allow medical marijuana deliveries in Colorado, saying they would send the wrong message to Washington and put the state at risk.

Hickenlooper, who opposed the ballot measure legalizing recreational pot in his state but has embraced the industry it created, has taken a diplomatic approach to keeping Washington at bay. He and Sessions had an hourlong meeting in Washington a few weeks ago, from which the governor emerged mildly optimistic.

“At one point he said, ‘You haven’t seen us cracking down, have you?’” Hickenlooper recalled to MSNBC. “I interpreted that as: He’s got his hands full.”

Other state officials are more antagonistic, as in California. State Attorney General Xavier Becerra recently mocked the warnings from Sessions, daring him to try to disrupt legalization in California.

Earl Blumenauer, a congressman from Portland and longtime legalization crusader, suggested the administration is too scandal-consumed to do much damage to the vibrant legalization movement. “These people are like one dumpster fire after another,” the Democrat said.

‘Could be a blessing’

Some in the nascent marijuana industry suggest the dose of uncertainty Trump has injected isn’t entirely bad. John Vardaman, a former Justice Department official now at a tech firm called Hypur that helps marijuana sellers and other businesses comply with financial regulations, said the threat from Washington intensifies pressure on companies and state regulators to operate with high ethical standards and not cut corners as the pot trade increasingly moves out into the open.

“In some ways, this potential threat could be a blessing,” he said. “It could ultimately create an industry that takes compliance with the rules more seriously.”

In the bustling main hall of the Marijuana Business Conference & Expo this month, worries about what Trump may do were taking a back seat to dealmaking and networking. A fledgling headhunting firm devoted exclusively to pot companies called Vangst reported it had placed 3,000 workers in two years. A Colorado company that makes neon signs advertising craft beer had on display some trippy designs now being used to hawk edible pot products.

Is business threatened by this administration?

“Who knows?” said Alan Bloom, chief executive of Zeon, the sign company. “We are dealing with politicians. I never underestimate the stupidity of politicians. But there is a lot of tax revenue on the line, and this industry has been growing like crazy since the election.”